Nvidia (NASDAQ: NVDA) and Meta Platforms (NASDAQ: META) have been shining stars for investors, with both companies poised for potential growth in 2025. Their strong positions in data center spending and digital advertising indicate a promising path ahead.

Despite their recent surges, these stocks boast low forward price-to-earnings (P/E) ratios compared to projected 2025 earnings on Wall Street, signaling a possible runway for substantial gains in the upcoming year.

Nvidia: Riding the Wave of Data Center Evolution

Nvidia’s stellar performance stems from the rapid growth in data centers transitioning to accelerated computing for handling AI workloads. The skyrocketing demand for the company’s GPUs has pushed the stock up by a remarkable 161% over the past year.

Trading at a forward P/E of 28 based on next year’s earnings, Nvidia’s current valuation appears undervalued, especially considering the expected 40% earnings growth in the coming year and 36% over subsequent years. If the stock maintains its trajectory to meet next year’s earnings estimate while trading at the same trailing P/E, investors could witness a surge beyond $200 per share.

Although the stock faced a minor setback due to concerns surrounding the delay in Nvidia’s Blackwell computing platform, the long-term demand outlook remains robust. With revenue generation from Blackwell expected to kick in the fourth quarter, coupled with a diverse range of workloads propelling growth in the data center segment, Nvidia is primed for another significant upswing.

Having witnessed similar valuation levels in December before its 2024 doubling in stock price, Nvidia’s current metrics suggest a potential reiteration of that performance as it unveils Blackwell.

Meta Platforms: Leveraging Digital Advertising Growth

The increasing dominance of digital advertising in overall ad spending continues to fuel Meta Platforms, the parent company of Facebook. Despite an 80% surge in stock value over the last year, Meta Platforms still trades at an attractive valuation, hinting at further upside potential in 2025.

Trading at a forward P/E of 22 based on next year’s earnings estimates, Meta Platforms’ current valuation significantly lags behind its 10-year average P/E of 38. Closing this gap could propel the stock by as much as 50%, considering analysts’ projected annualized earnings growth of 17% in the long run.

A key driver for Meta’s growth is its strategic investments in AI, exemplified by the introduction of Llama, a potent language model that bolsters user engagement and revenue growth. Meta AI, powered by Llama, is enhancing user experience and boosting advertising revenue, as evidenced by the company’s 22% year-over-year revenue growth in Q2.

With significant opportunities for expansion in the digital advertising realm and a robust financial standing, Meta Platforms plans to intensify its focus on AI infrastructure. This strategic move, coupled with its solid profitability and ample free cash flow, positions Meta Platforms as a conservatively valued entity deserving of a valuation boost.

Maximizing Investment Potential: Insight from the Past

Before making a decision on investing in Nvidia, consider this:

The Motley Fool Stock Advisor analyst team highlighted the top 10 stocks for future growth, with Nvidia not making the list. Reflecting on past success, Nvidia’s transformative journey over the years underscores the potential for remarkable returns. In fact, a $1,000 investment in Nvidia back in April 2005 could have flourished into an astounding $710,860*!

Stock Advisor empowers investors with a blueprint for success, delivering regular insights, portfolio construction guidance, and two new stock picks monthly. Over the years, the service has outperformed the S&P 500 by more than fourfold since 2002*.

Unveiling the potential of tomorrow’s winners requires a keen eye for transformative ventures, and historical successes like Nvidia’s serve as a testament to the rewards of visionary investing.

Discover the next 10 stocks on the rise »

*Stock Advisor returns data as of September 16, 2024

Randi Zuckerberg, former director of market development at Facebook and sibling of Meta Platforms CEO Mark Zuckerberg, sits on The Motley Fool’s board of directors. John Ballard holds positions in both Meta Platforms and Nvidia. The Motley Fool has investments in and recommends both Meta Platforms and Nvidia. The Motley Fool maintains a disclosure policy.

The opinions expressed in this article are solely those of the author and do not reflect the views of Nasdaq, Inc.